A Report on the Audit of the Employees Retirement System's Fiscal Year 2009 Financial Statements
January 2010
Report Number 10-020
Overall Conclusion
In our audit report dated November 18, 2009, we concluded that the Employees Retirement System's (System) basic financial statements for fiscal year 2009 were materially correct and presented in accordance with accounting principles generally accepted in the United States of America.
Auditors also issued a report on internal control over financial reporting and on compliance and other matters as required by auditing standards. The System's internal control over section 218 billing agreements failed to detect a potential material misstatement that constituted a material weakness in internal control over financial reporting for the Social Security Administration Fund. Specifically, the System charged some entities that had section 218 agreements with the System incorrect amounts for administration fees. (Section 218 agreements allow entities to participate in the federal Social Security retirement program. According to information the System provided, more than 2,200 entities had section 218 agreements as of August 31, 2009.) Although the balance of the Social Security Administration Fund was $59,777 as of August 31, 2009, Statement No. 34 of the Governmental Accounting Standards Board - Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments (GASB 34) required that this fund be classified as a "major" fund; therefore, auditors identified this error as a material weakness in the System's control structure. After auditors brought this error to the System's attention, the System corrected it and properly recorded and reported an adjustment to the billing amounts. However, the error was not initially identified by the System's internal control.
Auditors also identified significant deficiencies in controls related to information technology, securities lending, financial accounting and reporting, and entity-wide risk assessment. Most of these issues had been identified in previous audits. The System has not fully corrected some of these issues, but it has partially addressed several of the information technology issues previously identified.
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